A Little Paradox in the Design of Regulatory Mechanisms
Several incentive mechanisms have been suggested in the literature to induce regulated monopolists to choose welfare-maximiz ing prices and cost levels for their services. Among the desirable pr operties of such mechanisms is that their application should be contr ollable by third parties ("verifiability"). A mechanism recently de signed by Sappington and Sibley (1988), incremental surplus subsidy, which is otherwise ideal in its properties, fails to be verifiable. A verifiable crude first-order approximation to this mechanism retains some, but lacks other, of the nice properties possessed by increment al surplus subsidy. This paper therefore analyzes closer (second-orde r) approximations to incremental surplus subsidy. Paradoxically, thes e approximations in a crucial sense are shown to perform worse than t he cruder approximation. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 29 (1988)
Issue (Month): 3 (August)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:29:y:1988:i:3:p:467-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.